Protein phosphorylation plays a major rote in the regulation of cellular processes including growth and differentiation. Protein dephosphorylation by protein tyrosine phosphatases can confer both a negative and positive growth effects depending on the specific phosphatase. We identified the PRL-I 21 kD nuclear protein tyrosine phosphatase as a highly induced mRNA and protein in regenerating liver cells and was constitutively expressed at a high level in hepatoma cells. Forced overexpression of PRL-1 in cells resulted in cellular transformation and enhanced proliferation. PRL-1 is modified by isoprenylation, and the PRL-I family includes three highly similar proteins in mammalian cells. In the past granting, period we have found that PRL- I is highly conserved throughout development with no amino acid changes in rat/mouse/human PRL-I and homologues in Drosophila and C. Elegans. We have cloned and analyzed both the mouse and human PRL-I genes and characterized PRL-I gene regulation in pancreatic, liver, fetal liver and other developing tissues, and differentiated tissues such as fat and intestine. To determine the function of the PRL- 1, we employed a two hybrid screening approach was employed, and found 31/38 true positives which represented only two distinct proteins, 15 isolates of a novel nuclear calcium binding protein, CABP-P (Calcium binding protein- PRL-I), and 16 isolates of a novel leucine zipper transcription factor, ATFx. Criteria for the importance of the interaction with PRL-I with these proteins included the two hybrid interaction in yeast, in vitro interaction between GST-PRL- I and in vitro translated CABP-P, ATFx, and other leucine zipper proteins that interact with PRL-1 (e.g. c-Jun, c-Fos). In vivo analyses using cotransfection studies with an AP-1 luciferase reporter demonstrate that PRL-I can regulate fos/jun and ATF-jun mediated transcriptions. We hypothesize that a mechanism similar to the calmodulin-NFAT system in which PRL- I activity is regulated by calcium via the interacting calcium binding protein CABP-P resulting in PTPase activation leading to direct dephosphorylation of transcription factors ATFx and potentially other B-zip proteins, or indirect effects via dephosphorylation of a coactivator. To test this hypothesis we will further analyze the interaction of PRL- I with ATFx and CABP-P both in vitro (specific aim 1) and in vivo (Specific aim 2). We will determine the importance of PRL- I in development and liver regeneration will also be determined by using a conditional knockout approach (specific aim 3).